Stevenson v Zafra Pty Ltd
[2020] WASC 160
•21 MAY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: STEVENSON -v- ZAFRA PTY LTD [2020] WASC 160
CORAM: MASTER SANDERSON
HEARD: ON THE PAPERS
DELIVERED : 21 MAY 2020
PUBLISHED : 21 MAY 2020
FILE NO/S: CIV 3027 of 2019
BETWEEN: CANDICE MARGARET STEVENSON
Plaintiff
AND
ZAFRA PTY LTD
First Defendant
WILSON & ATKINSON PTY LTD
Second Defendant
Catchwords:
Costs - Application to set aside costs agreements - Turns on own facts
Legislation:
Legal Profession Act 2008 (WA)
Result:
Plaintiff's application to set aside costs agreements dismissed
Category: B
Representation:
Counsel:
| Plaintiff | : | No appearance |
| First Defendant | : | No appearance |
| Second Defendant | : | No appearance |
Solicitors:
| Plaintiff | : | In Person |
| First Defendant | : | Zafra Legal |
| Second Defendant | : | Zafra Legal |
Case(s) referred to in decision(s):
BGM v Australasian Lawyers Group Pty Ltd t/as Butlers Barristers & Solicitors [2014] WASC 290
MASTER SANDERSON:
This is the plaintiff's application seeking to set aside two costs agreements. The first of these agreements is dated 28 October 2015 and is between the plaintiff and the second defendant. I will refer to that as the 'First Agreement'. The further agreement was made 1 May 2016 and is between the plaintiff and the first defendant. I will refer to that as the 'Second Agreement'.
The plaintiff in this application is self‑represented. It would appear that she issued the originating summons personally. It does not specify under which section of the Legal Profession Act 2008 (WA) (the Act) the application is brought. Submissions in support of the application were drafted by Mr Garnsworthy, a very experienced and able practitioner in the field of costs. Those submissions refer to the plaintiff seeking a declaration under s 268 of the Act that the costs agreements were not 'fair' or 'reasonable'. Section 268(3) is to the effect that if there is a failure to disclose certain matters as is required by s 260 then an application may be made under s 288 for the costs agreement to be set aside. Section 288(3)(c) refers to a failure to make disclosure as one of the matters to be considered in determining whether or not a costs agreement is fair or reasonable. All of this leads to the view that the plaintiff's application is in fact made pursuant to s 288(2) of the Act.
As I understand it, the plaintiff's position is that disclosure as required by the Act was not provided by either the first or second defendants prior to her signing the First and Second Agreement. In support of her application the plaintiff has sworn two affidavits, the first on 12 December 2019 and the second on 3 March 2020. At pars 62 through to 72 of her first affidavit the plaintiff sets out the reasons why she says there was inadequate disclosure. In the second affidavit the plaintiff joins issue with the defendants. She does not really advance her argument that there was inadequate disclosure. So far as the defendants are concerned they rely on an affidavit of Shayne Graham Leslie sworn 13 February 2020. As is to be expected, Mr Leslie sets out the reasons why he says there was adequate disclosure and why both agreements are fair and reasonable.
Before setting out the relevant facts I should say something of the statutory framework which applies to this application. In BGM v Australasian Lawyers Group Pty Ltd t/as Butlers Barristers & Solicitors [2014] WASC 290 I set out the way in which various sections interrelate and the basis upon which a costs agreement can be set aside. The relevant parts of that decision read as follows:
47As at March 2010 the statutory framework relating to costs between solicitor and client was covered by the Legal Profession Act 2008. Part 10 of that Act deals with costs disclosures. Section 251 sets out the purposes of this part of the Act. It reads as follows:
The purposes of this Part are as follows -
(a)to provide for law practices to make disclosures to clients regarding legal costs;
(b)to regulate the making of costs agreements in respect of legal services, including conditional costs agreements;
(c)to regulate the billing of costs for legal services;
(d)to provide a mechanism for the assessment of legal costs and the setting aside of certain costs agreements.
48Division 3 of pt 10 deals with 'Costs disclosure'. For present purposes s 260 is relevant. It is in the following terms:
260.Disclosure of costs to clients
(1)A law practice must disclose to a client in accordance with this Division -
(a)the basis on which legal costs will be calculated, including whether a costs determination applies to any of the legal costs; and
(b)the client's right to -
(i)negotiate a costs agreement with the law practice; and
(ii)receive a bill from the law practice; and
(iii)request an itemised bill after receipt of a lump sum bill; and
(iv)be notified under section 267 of any substantial change to the matters disclosed under this section;
and
(c)an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable -
(i)a range of estimates of the total legal costs; and
(ii)an explanation of the major variables that will affect the calculation of those costs;
and
(d)details of the intervals (if any) at which the client will be billed; and
(e)the rate of interest (if any) that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (2)); and
(f)if the matter is a litigious matter, an estimate of -
(i)the range of costs that may be recovered if the client is successful in the litigation; and
(ii)the range of costs the client may be ordered to pay if the client is unsuccessful;
and
(g)the client's right to progress reports in accordance with section 269; and
(h)details of the person whom the client may contact to discuss the legal costs; and
(i)the following avenues that are open to the client in the event of a dispute in relation to legal costs -
(i)costs assessment under Division 8;
(ii)the setting aside of a costs agreement under section 288;
(iii)making a complaint under Part 13;
and
(j)any time limits that apply to the taking of any action referred to in paragraph (i); and
(k)that the law of this jurisdiction applies to legal costs in relation to the matter; and
(l)information about the client's right -
(i)to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter; and
(ii)to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter.
(2)For the purposes of subsection (1)(e), a benchmark rate of interest is a rate of interest for the time being equal to or calculated by reference to a rate of interest that is specified or determined from time to time by an ADI or another body or organisation, or by or under other legislation, and that is publicly available.
(3)The regulations may make provision for or with respect to the use of benchmark rates of interest, and in particular for or with respect to permitting, regulating or preventing the use of particular benchmark rates or particular kinds of benchmark rates.
(4)For the purposes of subsection (1)(f), the disclosure must include -
(a)a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs; and
(b)if applicable, a statement that disbursements may be payable by the client even if the client enters into a conditional costs agreement.
(5)A law practice is taken to have complied with the requirement to disclose the details referred to in subsection (1)(b)(i), (ii) and (iii), (g), (i), (j) and (l) if it provides a written statement in or to the effect of a form prescribed by the regulations for the purposes of this subsection at the same time as the other details are disclosed as required by this section.
(6)A form prescribed for the purposes of subsection (5) may, instead of itself containing details of the kind referred to in that subsection, refer to publicly accessible sources of information (such as an internet website) from which those details can be obtained.
(7)The regulations may require the Board to develop a statement of the relevant details and to revise it as necessary to keep it up to date.
49Pursuant to s 262(1) the disclosure required by s 260 must be made as soon as practical after the law practice is retained. Section 264 deals with additional disclosure in settlement of litigious matters. It is in the following form:
264.Additional disclosure - settlement of litigious matters
(1)If a law practice negotiates the settlement of a litigious matter on behalf of a client, the law practice must disclose to the client, before the settlement is executed -
(a)a reasonable estimate of the amount of legal costs payable by the client if the matter is settled (including any legal costs of another party that the client is to pay); and
(b)a reasonable estimate of any contributions towards those costs likely to be received from another party.
(2)A law practice retained on behalf of a client by another law practice is not required to make a disclosure to the client under subsection (1) if the other law practice makes the disclosure to the client before the settlement is executed.
50Section 266 requires the disclosure to be in 'clear plain language'. Section 267 requires the law practice to disclose to a client any 'substantial change to anything included in a disclosure already made'. The consequences of a failure to disclose are set out in s 268 of the Act. It is in the following terms:
268.Effect of failure to disclose
(1)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed, the client or associated third party payer (as the case may be) need not pay the legal costs unless they have been assessed under Division 8.
(2)A law practice that does not disclose to a client or an associated third party payer anything required by this Division to be disclosed may not maintain proceedings against the client or associated third party payer (as the case may be) for the recovery of legal costs unless the costs have been assessed under Division 8.
(3)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed and the client or associated third party payer has entered a costs agreement with the law practice, the client or associated third party payer may also apply under section 288 for the costs agreement to be set aside.
(4)If a law practice does not disclose to a client or an associated third party payer anything required by this Division to be disclosed then, on an assessment of the relevant legal costs, the amount of the costs may be reduced by an amount considered by the taxing officer to be proportionate to the seriousness of the failure to disclose.
(5)If a law practice retains another law practice on behalf of a client and the first law practice fails to disclose something to a client solely because the retained practice failed to disclose the relevant information as required by section 261(2), then subsections (1) to (4) -
(a)do not apply to the legal costs owing to the first law practice on account of legal services provided by it, to the extent that the non disclosure by the first law practice was caused by the failure of the retained law practice to disclose the relevant information; and
(b)do apply to the legal costs owing to the retained law practice.
(6)In a matter involving both a client and an associated third party payer where disclosure has been made to one of them but not the other -
(a)subsection (1) does not affect the liability of the one to whom disclosure was made to pay the legal costs; and
(b)subsection (2) does not prevent proceedings from being maintained against the one to whom the disclosure was made for the recovery of those legal costs.
(7)Failure by a law practice to comply with this Division is capable of constituting unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner or Australian registered foreign lawyer involved in the failure.
51Under s 271 a legal practice may recover costs pursuant to a costs agreement made in accordance with div 6. Otherwise costs are paid pursuant to the applicable cost determination. That then leads on to div 6 dealing with costs agreements.
52Pursuant to s 282 a law practice and a client may enter into a costs agreement. Such an agreement must be in writing and there are a number of other conditions which must be met for the agreement to be effective. There are a number of limitations on what can be included in a costs agreement but they are not presently relevant.
53Section 288 deals with setting aside of costs agreements. It is in the following terms:
288.Setting aside costs agreements
(1)In this section -
client means a person to whom or for whom legal services are or have been provided.
(2)On application by a client, the Supreme Court may order that a costs agreement be set aside if satisfied that the agreement is not fair or reasonable.
(3)In determining whether or not a costs agreement is fair or reasonable, and without limiting the matters to which the Supreme Court can have regard, the Supreme Court may have regard to any or all of the following matters -
(a)whether the client was induced to enter into the agreement by the fraud or misrepresentation of the law practice or of any representative of the law practice;
(b)whether any Australian legal practitioner or Australian registered foreign lawyer acting on behalf of the law practice has been found guilty of unsatisfactory professional conduct or professional misconduct in relation to the provision of legal services to which the agreement relates;
(c)whether the law practice has failed to make any of the disclosures required under Division 3;
(d)the circumstances and the conduct of the parties before and when the agreement was made;
(e)the circumstances and the conduct of the parties in the matters after the agreement was made;
(f)whether and how the agreement addresses the effect on costs of matters and changed circumstances that might foreseeably arise and affect the extent and nature of legal services provided under the agreement;
(g)whether and how billing under the agreement addresses changed circumstances affecting the extent and nature of legal services provided under the agreement.
(4)The Supreme Court may adjourn the hearing of an application under this section pending the completion of any investigation or determination of any charge in relation to the conduct of any Australian legal practitioner or Australian registered foreign lawyer.
(5)If the Supreme Court determines that a costs agreement be set aside, the Court may make an order in relation to the payment of legal costs the subject of the agreement.
(6)In making an order under subsection (5) -
(a)the Supreme Court must apply the applicable costs determination (if any); or
(b)if there is no applicable costs determination - the Court must determine the fair and reasonable legal costs in relation to the work to which the agreement related, taking into account -
(i)the seriousness of the conduct of the law practice or any Australian legal practitioner or Australian registered foreign lawyer acting on its behalf; and
(ii)whether or not it was reasonable to carry out the work; and
(iii)whether or not the work was carried out in a reasonable manner.
(7)In making an order under subsection (5), the Supreme Court may not order the payment of an amount in excess of the amount that the law practice would have been entitled to recover if the costs agreement had not been set aside.
(8)For the purposes of subsection (6)(b), the Supreme Court may have regard to any or all of the following matters -
(a)whether the law practice and any Australian legal practitioner or Australian registered foreign lawyer acting on its behalf complied with this Act;
(b)any disclosures made by the law practice under Division 3, or the failure to make any disclosures required under that Division;
(c)any relevant advertisement as to -
(i)the law practice's costs; or
(ii)the skills of the law practice or of any Australian legal practitioner or Australian registered foreign lawyer acting on its behalf;
(d)the skill, labour and responsibility displayed on the part of the Australian legal practitioner or Australian registered foreign lawyer responsible for the matter;
(e)the retainer and whether the work done was within the scope of the retainer;
(f)the complexity, novelty or difficulty of the matter;
(g)the quality of the work done;
(h)the place where, and circumstances in which, the work was done;
(i)the time within which the work was required to be done;
(j)any other relevant matter.
(9)The Supreme Court may determine whether or not a costs agreement exists.
(10)The Supreme Court may order the payment of the costs of and incidental to a hearing under this section.
54It is clear from the sections I have quoted above the teeth in this part is found in s 288(2). This is the subsection which gives the court the power to cancel a costs agreement. Two things may be said about that subsection. First the agreement can be cancelled if it is not 'fair or reasonable'. Presumably the 'or' is disjunctive - that is to say, the agreement can be cancelled if it is not fair but reasonable; or if it is reasonable but not fair. Second, assuming an agreement is either not fair or not reasonable, the court has a discretion as to whether the agreement should be cancelled. Section 288(3) lists matters to which the court 'may' have regard. The subsection is not mandatory. The matters to which the court may have regard and listed in that subsection go to the issue of whether the agreement is fair or reasonable. They may well overlap with matters to be considered in exercising the discretion. But the subsection makes it plain these matters can be considered when considering the fairness and reasonableness of the agreement.
55Finally it is worth noting this section differs somewhat from s 222 of the Legal Practice Act 2003 (WA). That section was in the following form:
222.Review of costs agreement
(1)A costs agreement may be reviewed by the Supreme Court upon application by summons or on a reference under section 235(2).
(2)If, in the opinion of the Supreme Court, the costs agreement is unreasonable -
(a)the Supreme Court may reduce the amount payable or cancel the costs agreement; and
(b)the costs may be taxed in the ordinary way.
(3)The Supreme Court may make such order as to the costs of and relating to the review, and the proceedings on the review, as the Court thinks fit.
56The reference in that section is to costs agreements which are 'unreasonable'. It would appear as yet there have been no cases which deal with the different formulations in the two Acts.
There is no real dispute between the parties as to the sequence of events which has led to the present impasse. At pars 3 through to 24 of his first set of written submissions counsel for the defendants sets out the relevant background facts. These paragraphs (with footnotes removed) read as follows:
3.The claims against the plaintiff were extensive and included damages for breach of contract, breach of fiduciary duty and breach of statutory duty. An alternative remedy for an accounting was also sought.
4.The trial of the main proceedings commenced 8 months and one week after the proceedings were issued. The trial was listed for 10 days on the issue of liability only.
5.The main proceedings settled during the first day of the trial.
6. Immediately prior to the settlement, the plaintiff had sought settlement on terms she receive a contribution of $250,000 towards her legal fees. The plaintiff defended the proceedings as a respondent. No counterclaim was brought by her.
7. That offer was rejected by the Atrum companies.
8. The settlement terms included the Atrum companies paying the plaintiff $50,000 plus issuing her $100,000 worth of Atrum shares, as a contribution towards her legal costs.
9. That led to the issue of 203,465/6 Atrum shares to the plaintiff. Those shares were to be held in escrow for a period of three months.
10. Further, the plaintiff recovered from an insurer a further $158,409.47 as a further reimbursement of her legal costs.
11.In total plaintiff received $308,409.47 as reimbursement of her legal fees. If the applicant had started selling her Atrum shares on the day they came out of escrow, then she would have received more than $144,460.15 for those shares. In total she would have received $352,869.62 as reimbursement of her legal costs.
12. In total, the legal fees billed by the defendants were $296,902.46. That is $11,507.01 less than the value of the contributions the plaintiff received for her costs, or $55,967.16 less than the amount the plaintiff would have received for her costs if she had sold the Atrum shares when they came out of escrow.
13.If the plaintiff had sold the Atrum shares during the periods 11 October 2016 to 31 January 2017 or 14 to 23 February 2017 or 3 to 7 March 2017 the plaintiff could have used the proceeds of sale of the Atrum shares to pay the defendants' invoices in full and had a 'windfall' to the plaintiff.
14.On 13 July 2016, two days after settlement of the main proceedings, the applicant's husband said in an email to the defendants:
'Please don't be polite regarding demands for payment. The settlement makes me a lot more confident that this can be fully resolved in a timely fashion.'
15.On 14 October 2016, 3 months after settlement of the main proceedings that is when the Atrum shares came out of escrow, the plaintiff made her position clear when she wrote to the defendants saying:
'I believe the voluntary escrow had expired this week.
I am working with a broker to sell at a reasonable price….
I will keep you updated and endeavour to settle the account as soon as possible.'
16. As it happened, the plaintiff did not sell any of the Atrum shares and did not pay the first defendant the balance of its invoices. Instead, because the share price had earlier been rising, the plaintiff got greedy and decided to wait for a better and more opportune moment to sell the Atrum shares, in the expectation that she would not only clear the debt that she owed to the defendants, but would, herself, make a greater profit from the whole exercise.
17. After slightly more than 3 months the share price fell below the price required to pay the plaintiff's indebtedness to the defendants in full. The share price briefly rose again above the amount required to pay the defendants' in full during February 2017 and March 2017, and ultimately collapsed.
18. Following request from Zafra Legal for payment of the outstanding fees the plaintiff wrote to Zafra Legal on 30 March 2017:
'It is unfortunate you have had to make the first contract regarding the outstanding account.
I still hold the shares issued by Atrum and have every intention in selling them to settle this account in full. I have had sell orders in place since the beginning of the month to cover exact amount owed. Unfortunately, the share price has continued to slide.
… I am optimistic it [the share price] will correct shortly.
…
I would like a little more time to continue to manage this from my side…'
19. Because the share price (in the vernacular) tanked, the plaintiff then decided the defendants could take the Atrum shares or their value or wait in the hope their value improved.
20. Following further request for payment of the outstanding fees, the plaintiff wrote to Zafra Legal on 16 October 2017:
'I'm sure you're aware of our circumstances now.… The shares were only ever held until the insurance settlement materialised…
I suggest we still wait for the shares to realise their potential value. Alternatively, we can sell at market now (~$40k) or transfer the shares as full and final settlement of the account.
Let me know how you wish to proceed'
21. When Zafra Legal continued to push for payment of the outstanding fees, on 8 March 2019, the applicant told Zafra Legal it could have $40,000 or the 203,465 Atrum shares.
22.Following further demand, and Zafra Legal lodging a caveat over the plaintiff's property pursuant to a charging clause in its costs agreement, and Zafra Legal commencing District Court proceedings for the outstanding fees; on 17 September 2019 (3 years 10 months after the first invoice and 2 years 9 months after the last invoice) the plaintiff sought to extend the time for assessment of the defendants' costs and then a further 2 months later applied to set aside the cost agreements (entered into 4 years 1 month and 3 years 5 ½ months earlier).
23. The dispute is not about the fairness or reasonableness of the costs agreements. It is about the plaintiff's desperate bid to recover from her decision not to sell the Atrum shares and to avoid payment to Zafra Legal of the balance of its fees.
24. The plaintiff has not paid to the defendants any of the value of the Atrum shares she received as a contribution towards her legal costs or, if the shares have now been sold, any of the proceeds of sale of the shares.
A copy of the First Agreement appears as part of attachment SGL7 to Mr Leslie's affidavit. The First Agreement and related disclosure documents come in a number of parts. First, there is a letter dated 28 October 2015 headed 'Costs Agreement Atrum Coal NL'. This letter comprises a number of sections and appears to have been specifically drafted with the plaintiff in mind. It refers to the litigation in which the plaintiff was involved. It also deals under a variety of sub‑headings with matters such as 'Fees and Expenses', 'Estimate of Total Legal Costs' and 'The Benefits and Costs of Litigation'. It has a signature clause. Above that signature clause there appears the following:
By signing this letter I acknowledge that I have received a copy of it and that I have read, understood and accepted its contents, including the schedule of fees and expenses and the terms of engagement.
The letter was signed by the plaintiff. (The copy of the letter attached to Mr Leslie's affidavit is unsigned. However, a signed copy of the letter is found as attachment CMS1 to the plaintiff's first affidavit).
The second part of the attachment is headed 'Schedule of fees and expenses (effective 1 July 2014)'. This sets out the hourly rate for particular professional staff. For instance 'Special Counsel' will charge at an hourly rate of $575. It also sets out 'Fees for support services and expenses' by way of example, the cost of photocopying/printing is 30 cents per page.
There then follows a document entitled 'Our terms of engagement'. This is a standard form document. Its status is covered in cl 2 of the document. That clause is in the following terms:
These terms of engagement form part of the offer we have made in the attached letter of engagement. Where there is any inconsistency between these terms of engagement and the content of the letter of engagement the provisions of the letter of engagement prevail.
The terms of engagement cover such matters as the solicitor's authority, the disclosure of confidential information, the issue and payment of accounts and so on. Clause 9 deals with 'Fees and expenses'. Clause 9.1 which has a subheading 'Professional fees' reads (in part) as follows:
We charge for our services on the basis set out in the attached letter of engagement and schedule of fees and expenses.
Clause 10.6 deals with 'Right to receive bill of costs and have costs reviewed'. Without quoting that clause in full it refers to s 288 and the right of the plaintiff, if she wishes, to apply to have the costs agreement set aside.
There is then attached to the document a copy of the Legal Practitioners (Supreme Court) (Contentious Business) Report 2012. At cl 8 of that determination there is, under the heading 'Maximum hourly and daily rates', a table of 'the maximum hourly and daily rates, inclusive of GST, which the Legal Costs Committee determines shall be used to calculate the dollar amounts of costs set out in Table B. In other words, the inclusion of the determination allows any person reading the document to compare the amounts they are being charged pursuant to the costs agreement and the maximum daily rates as determined by the Committee.
Before moving to the specific complaints made by the plaintiff I should say that on the face of it the form of the First Agreement and the extent of the disclosure by the second defendant seem to be reasonable. In reality there are two aspects to an agreement between a solicitor and a client which are all important. First, the client must know what work will be undertaken by the solicitor on their behalf. To some extent that is obvious - in litigation where the client is a defendant the solicitor will bring to bear professional expertise to protect the client's position. But any agreement must make that clear if the client is to feel comfortable engaging a solicitor's services. The second and most important aspect of any agreement is the costs which will be rendered by the solicitor to the client. That has at least two aspects. First, an estimate of what the costs might be and second, the basis upon which those costs will be calculated. No solicitor can give a precise dollar figure as to what it will cost to defend an action. No reasonable client could expect such a precise figure. Every client hopes costs can be kept to a minimum while their solicitors conduct a stout defence. But all that can be expected is a fair and reasonable estimate and a clear basis for charging. That appears to be what was done in this case.
It also needs to be borne in mind that the plaintiff clearly has experience in the commercial world. Prior to signing the First Agreement in October 2015 she had worked for three years as an accountant for a listed public company. No one who occupies a position such as that would be unfamiliar with the realities of the corporate world. It would be surprising if upon reading the costs agreement, the schedule and considering the attachments, she was unaware of her potential liability for costs. So while it was incumbent upon the solicitors to make disclosure to the plaintiff - that is their statutory obligation - they could reasonably assume she would understand what are clearly drafted documents. There is nothing obscure or obtuse in the wording of any of the documents. In fact they are a model of plain English drafting. It is very difficult to see how the second defendant could have produced an agreement and attachments which better explain the relationship between the plaintiff and the second defendant.
Turning then to the plaintiff's written submissions, by par 2.1 counsel says the defendants owed a fiduciary duty to the plaintiff. There is no doubt, as a statement of principle, that is correct. Counsel then says as part of that fiduciary duty and because the financial circumstances of the plaintiff were known to the defendants, the defendants ought to have taken the plaintiff's financial situation into account when formulating the costs agreement. Formulated in that way, counsel seems to be suggesting the fiduciary relationship between the plaintiff and the second defendant translated into some form of positive duty on the part of the second defendant when drawing the costs agreement. As a matter of principle that cannot be correct - fiduciary duties are negative not positive. For instance, it may well be correct to say that as part of a fiduciary duty between two parties there is a duty not to disclose confidential information. But a fiduciary relationship cannot lead to a positive duty to draft a costs agreement in a particular way because a party has knowledge of the financial position of another party.
Nor can a fiduciary relationship lead to a requirement that a costs agreement not involve time costing. That is simply beyond the scope of any duties arising out of a fiduciary relationship.
In par 3 of his submissions, counsel makes a number of specific criticisms of the costs agreement. For instance in par 3.6 he says:
The estimates in the agreement are vague and do not allow the Plaintiff to make an informed decision whether to enter into an agreement for the provision of legal services.
With respect, that criticism does not seem to me to be made out. As I have indicated above, estimating costs likely to be incurred in litigation is an inexact science. It depends, in part, upon the complexity of the case being undertaken, the extent to which interlocutory processes are used and ultimately upon the way in which the case organically develops. Looking at the nature of this case it would be clear to any experienced practitioner that an estimate was difficult and necessarily imprecise.
The other main criticism relates to the schedule of fees with particular reference to the time costing provisions. There is even criticism of the charge out rate for photocopying - 33 cents a page when 30 cents a page would have been reasonable. In my view there is nothing in those criticisms to suggest that any aspect of the agreement is either not fair or not reasonable.
Turning to the plaintiff's evidence, she does not set out in any detail how she says the First Agreement is not fair or not reasonable. She does say that the second defendant was aware she was in a precarious financial position. She also says the second defendant knew that she was dependent upon third parties to meet costs she would be charged by the second defendant. But none of that renders the agreement itself either not fair or not reasonable.
In all the circumstances then I am not satisfied there is any basis upon which the First Agreement could be set aside. I am not satisfied there has been a failure on the part of the second defendant to make full disclosure. Nor am I satisfied that any aspect of the agreement is either not fair or not reasonable. Accordingly, the plaintiff's challenge to the First Agreement fails and the plaintiff's application in relation to the second defendant will be dismissed.
Turning then to the Second Agreement, in all major respects it is identical to the First Agreement. The Second Agreement came about when the second defendant was subsumed into the first defendant. A copy of the Second Agreement is attached as annexure SGL11 to Mr Leslie's affidavit. A fresh letter of engagement was sent to the plaintiff and once again that does appear to have been drafted specifically with the plaintiff in mind. It is also different in some respects from the letter of engagement sent out by the second defendant. For instance, under the heading 'Fees and expenses' there are six legal practitioners mentioned and their hourly rates are specified. In the second defendant's letter of engagement only Mr Leslie was mentioned. But in large measure the two letters are identical and in all major respects the terms of engagement remained the same. The schedule appears to have been updated with higher charge out rates and increased fees. There are some minor charges to the terms of engagement but nothing of significance.
Counsel for the plaintiff has in his written submissions made criticisms of the Second Agreement which go beyond those he made of the First Agreement. But none of those complaints are, in my view, material. To give a flavour of the nature of the complaints made, counsel points out that a reference to the Supreme Court Scale of Costs is an error; the reference should have been to the Federal Court Scale of Costs. While the point made is correct, it hardly goes to the substance of the contractual relationship between the parties. The point made in both agreements is that the costs rendered by the defendants are higher than scale. In other words, the plaintiff was being informed that she was paying a premium above what, at least sofar as the Supreme Court was concerned, was the upper limit of the entitlement of a practitioner. It is important, with reference to the statutory scheme, she was so informed. It is unfortunate there was an error. But it was a minor error and not enough to vitiate the contractual relationship between the plaintiff and the defendants.
Largely what I have said about the First Agreement translates to the Second Agreement. The Second Agreement was fair and it was reasonable. There is no basis upon which it should be set aside. The plaintiff's application in relation to the first defendant will be dismissed.
On publication of these reasons the parties should confer in an attempt to agree orders. There would seem to be no reason why costs of this application should not follow the event. However, if the parties are unable to agree the form of orders each party should, within seven days of the publication of these reasons provide a minute of orders they propose should be made.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CB
Associate to Master Sanderson21 MAY 2020
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